Stafford Capital closes timberland fund on $695m

Opportunities in the secondaries space have remained ‘quite strong through the covid period,’ but a lack of assets entering the market could stifle co-investments.

Stafford Capital Partners has held a final close on the ninth iteration of its international timberland fund at $695 million, making it the secondaries investor’s biggest timber vehicle.

Stafford International Timberland Fund IX was launched at the end of 2019 and fundraising predominately took place during the pandemic, during which it endured a seven- to eight-month stretch in 2020 when “a lot of LPs were just watching their portfolios before they made the decision to commit,” timberland managing partner Stephen Addicott told Agri Investor.

The firm was aided by the fact that of the 10 investors to have committed to the vehicle, five were repeat investors who invested early during the fundraising period alongside one new investor. Addicott said 40 percent of commitments into the fund came from the UK, 36 percent from mainland Europe and 26 percent from Asian investors, including $150 million from the National Pension Service of Korea.

Typical commitment sizes were between the $30 million and $50 million mark, with three investments above $100 million and a handful within the $5 million range. SIT IX has a closed-ended structure and a 12-year term. The vehicle has a cash yield target of 4 percent and an internal rate of return of eight percent-10 percent.

Interest in timberland “is certainly higher now” compared with pre-pandemic levels, said Addicott, which he attributed to a the longstanding trend of LPs diversifying beyond equities and bonds towards higher cash-yielding assets.

“The other one reason is a recognition of the benefits of timberland investing from a sustainability perspective. It’s too early to say that appetite is coming from a net-zero perspective, but there is a recognition which embraces sustainable investments,” said Addicott.

SIT IX has a mandate to invest in secondaries, co-investments and make primary fund investments. The fund will pursue mature existing softwood, hardwood and eucalyptus plantations in North America, Latin America, Australia and New Zealand.

The fund also has a maximum 10 percent allocation to the timber processing sector, which is a first for Stafford forestry vehicles. The fund has deployed more $200 million across eight investments to date, confirmed Addicott, through a mixture of secondaries and co-investments, one of which is into a US processing facility.

“Opportunities on the secondaries side have remained quite strong through the covid period,” said Addicott, which he attributed to LPs needing to change their portfolio mix, switching fund manager, as well as fund restructures.

“What has occurred over covid has been a lack of timberland assets coming to the market because it’s been difficult for timberland managers to travel around the world to undertake due diligence. There’s been a good 12-18 months when there’s been very few assets coming on the market so if anything, that’s made things a little bit more difficult on the co-investment side,” Addicott added.

Stafford Capital Partners’ total timberland assets under management is now $2.9 billion. The firm as a whole has more than $8.1 billion of AUM, according to its website.